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Under Health Law, Employers Must Insure Workers' Dependents

By

Janet Adamy

Dec. 28, 2012 9:06 p.m. ET

Large employers who are subject to the health overhaul law's requirement to provide insurance or pay a fee must also extend coverage to their workers' dependent children, according to federal regulations released Friday.

The 144-page proposed regulation that the Obama administration unveiled late Friday offered new details for how employers will have to comply with the health overhaul law, which is set to take full effect in 2014. The law is designed to expand insurance coverage to about 30 million Americans, in part by requiring businesses with 50 or more full-time workers to offer insurance or pay a penalty.

Some employers had argued that the law, passed in 2010, required that large employers provide coverage only to their employees and not their families. But in the proposed rules released Friday, the administration said the requirement meant qualifying employers must also extend coverage to workers' children who are under age 26. The regulation noted that this piece of the law included the term "dependent" when addressing who the provision will cover.

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However, the requirement doesn't mean that the employer would have to extend health insurance coverage to a worker's spouse, since spouses weren't explicitly mentioned in this part of the law, according to the rules released Friday. Additionally, employers won't be required to subsidize insurance plans for dependents the same way they will for employees.

The penalties for not covering dependents won't take effect until 2015 for employers that are working toward making the change.

Starting in 2014, large employers that don't offer coverage to their full-time employees will have to pay a penalty of $2,000 per full-time worker per year if workers receive a federal tax credit to buy insurance. The employer won't have to pay for the first 30 workers who are included in the penalty calculation.

The new rules also said that companies that have a common owner or are otherwise related generally would be counted as a single employer for the purposes of determining whether they employ at least 50 full-time workers. Some franchised business owners had hoped their outlets would be counted separately to reduce the impact of the requirement. However, penalties assessed on employers who don't provide coverage to workers in only one subset of their business wouldn't necessarily apply to whole business.

Under Health Law, Employers Must Insure Workers' Dependents

Large employers who are subject to the health overhaul law's requirement to provide insurance or pay a fee must also extend coverage to their workers' dependent children, according to federal regulations released Friday.